Integrated Reports Senwesbel Consolidated Financial Statements 2018 - Page 35

8. TRADE AND OTHER RECEIVABLES GROUP NOTES 2 310 2 128 8.1 1 988 1 861 Trade receivables Production accounts 2017 R’m 2018 R’m 8.2 322 267 Current portion of loans and other receivables 6.1 303 274 Grain debtors 8.3 190 136 Current accounts Sundry receivables 8.4 119 116 Less: Provision for impairment 8.5 ( 94) (97) 2 828 2 557 Balance at the end of the year 8.1 Production accounts mainly include the extension of credit to producers on a seasonal basis for purposes of procuring inputs and/or mechanisation purchases from or via Senwes. These accounts bear interest at market-related rates. These accounts consist of the following: Summer production credit due 31 August Winter production credit due 31 January Animal production credit due 31 August 8.2 Current accounts consist of 30-day monthly accounts, silo cost accounts and other accounts for specific products. These accounts bear interest at the following rates: Monthly account: Interest-free for the first 30 days after date of statement, thereafter classified as arrears. Silo cost account: Interest-free period that varies from season to season (determined before every season), thereafter classified as arrears. Deferred payment arrangement: Interest-free period that varies according to various transactions and products, thereafter classified as arrears.  Interest on arrear accounts is levied at guideline rates as determined by the National Credit Act. 8.3 Grain debtors represent agricultural produce sold to third parties. A provision for impairment of R2,9 million (2017: R1,7 million) is included in the group balance. No agency grain debtors were encumbered at-year end (2017: Rnil). The terms of these debtors are as follows: Mill-doors Receivable within 7 days after delivery after which interest is charged at a prime-linked rate. Ex-silo financing Interest at a prime-linked rate from date of invoice and receivable 30 days from date of statement. Ex-silo non-financing Receivable within 48 hours, thereafter interest at a prime-linked rate. 8.4 Sundry receivables consist of accounts for corporate and statutory services as well as deposits held for trading purposes (Safex). 8.5 The objective of the impairment requirements is to recognise expected credit losses for financial assets in respect of which there have been significant increases in credit risk since initial recognition — whether assessed on an individual or collective basis — considering all reasonable and supportive information, including that which is forward-looking. Impairment = total book x probability of default (PD) x loss given default (LGD). Impairment of a financial asset is dependent on whether the credit risk of the financial asset has increased significantly since initial recog- nition. Indicators of impairment of a financial asset include: • Non-compliance with arrangements or agreements. • Insolvencies or near-insolvencies. • Apparent financial problems or poor key financial ratios. • Other indicators such as drought or low commodity prices which will affect the customer’s ability to settle outstanding debt. Individual impairment assessment: The two most significant indicators of impairment identified in the current financial year, are arrears (non-compliance with debtor terms) and the severe drought experienced during the current season that significantly impacted the producers’ turnover. Specifically impaired (legal clients): This will typically be a case where the debtor is already handed over to the legal department for recovery. The impairment represents the actual risk (LGD) for possible bad debt determined by the legal department, taking into account all securities and the client’s balance sheet. The factors that influence management’s estimates and judge- ment include whether customers who have been handed over to the legal department for collection are specifically provi- ded for, based on the exposure and the estimation of the quality and expected realisation of securities held for the specific customers. Senwesbel Limited Reg no: 1996/017629/06 SENWESBEL ANNUAL FINANCIAL STATEMENTS 2018 34